ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – WHEN THE IRS LABELS YOU AS “A SERIOUSLY DELIQUENT TAXPAYER”
By Robert S. Schriebman
What does it mean when the IRS sends you a letter stating that you are a “seriously delinquent taxpayer”? Robert Rowen found out the hard way. Rowen is a medical doctor who does not like to pay his taxes. He failed to file and failed to pay his taxes for more than two decades – that’s over twenty years! He was criminally prosecuted by the IRS for several years of violations, but even after his conviction, he continued the pattern of not filing and not paying. He eventually owed the IRS over $500,000. The IRS used all means to try to collect from Rowen. They sent demands, filed liens, attempted to levy on Rowen’s assets- all without much success. Finally, in 2018, the Commissioner of Internal Revenue used a new tool in his collection toolbox- IRC §7345- labeling Rowen as a seriously delinquent taxpayer.
This article will discuss the U.S. Tax Court decision in Robert Rowen V. Commissioner; U.S. Tax Court, CCH Dec. 61,847, 156 T.C. No.8 (Mar. 30,2021) This was as case of first impression.
The FAST Act
The FAST Act stands for Fixing America’s Surface Transportation Act (‘FAST Act’), Pub. L. No. 114-94, 129 Stat. at 1729 (2015). Part of this Act created IRC § 7345. This allows the IRC Commissioner to certify a taxpayer as seriously delinquent. The certification is sent by the Commissioner to the Secretary of the Treasury who in turn sends it on to the Secretary of State who has the discretion either to refuse to issue a passport or to revoke an existing passport.
Section 7345(a) provides
If the Secretary [of the Treasury] receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, the Secretary [of the Treasury] shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.
A “seriously delinquent tax debt” is an amount owed to the IRS that is greater than $51,000. A person so labeled has a right to challenge the designation in the U.S. Tax Court. Dr. Rowen elected to challenge the Commissioner’s designation. He made several arguments, all without success.
Dr. Rowen’s arguments
Dr. Rowen first argued that under the Fifth Amendment’s Due Process Clause, his rights were violated because certification under IRC § 7345 prevented him from traveling internationally. The Tax Court judge pointed out that certification does not restrict his rights to international travel. Certification only informs the Secretary of the Treasury who passes the certification on to the Secretary of State who makes the actual decision impacting Dr. Rowen’s passport. Neither the IRS nor Treasury can make any decision impacting a passport.
Dr. Rowen’s next argument was that the IRS Commissioner erred in certifying Rowen as seriously delinquent. Rowen lost this argument too. He owed the IRS more than $51,000 and that was enough to put the label on him.
Dr. Rowen traveled all over the world as a physician to offer medical services free of charge. He also had family members in Singapore and mainland China. His passport was revoked not by the IRS but by the Secretary of State. He deserved what he got. If you have the same exposure there are things you can do to help yourself to either eliminate or postpone having your passport revoked or not issued:,/p>
- Get your IRS debt below $51,000.
- File a timely Collection Due Process (CDP) petition
- Have an ongoing installment agreement in force.
- Make sure all or part of what you owe the IRS is time-barred
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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